Telco Levy… Another new tax, another broken promise?

Industry concerns are mounting over changes to the Telecommunications Development Levy, with both the Telecommunications Forum and Labour slamming the recent passing of the bill.

In representing key telco players such as 2degrees, Chorus, Spark and Vodafone, the Telecommunications Forum (TCF) has highlighted its trepidation about the process the Government has followed to extend a tax on the telecommunications industry to pay for the extension to rural broadband.

Following the Budget announcements, the Government tabled a Bill in the House under urgency, to extend the Telecommunications Development Levy in order to tax the industry to pay for the next round of the rural broadband initiative.

“This Bill has been introduced under urgency and doing so avoids any public debate,” says Geoff Thorn, CEO, TCF.

“This is a proposal which has not been the subject of any consultation and which has avoided the usual scrutiny of that would apply to Government spending.

“The TCF supports expanding broadband to New Zealanders wherever they are, and the industry is investing billions to support this goal.

"The Government’s initiative to partly subsidise the build of the fibre networks (UFB) to urban New Zealand is a positive investment for all.”

However, Thorn believes extending the rural broadband initiative and taxing the industry to fund it, is not only inconsistent with the funding approach for UFB, but is a financial burden the industry cannot afford as it deals with declining revenues and profits.

“The Bill extends a tax, which to date, has not been explicitly recovered from consumers,” Thorn adds. “However, the industry cannot continue to absorb ongoing costs of this magnitude.”

Going forward, MBIE is proposing further changes to the Telecommunications Development Levy.

“The TCF is now concerned about the industry’s opportunity to be consulted on these changes, and for the industry to propose further changes,” Thorn adds.

The Telecommunications Development Levy is an industry levy which is collected from about 22 telecommunications companies that earn more than $10 million a year from operating a public telecommunications network. It is used to fund open access infrastructure in areas where it would otherwise be unlikely to be commercially viable for them to build that infrastructure.

Levy payers can then use that infrastructure to provide services to their customers.

Echoing the concern of the TCF, Labour’s ICT spokesperson Clare Curran has slammed the move, claiming that the rural broadband levy that will almost certainly result in an immediate price hike for internet and telephone connections across New Zealand.

“The Telecommunications Development Levy Amendment Bill that is being rushed through under urgency today will force the telco industry to hike broadband prices,” Curran says.

“The Bill increases a levy on the big players in the telecommunications industry of $50 million a year and breaks their election promise of no new taxes.

“Not only is this a new Broadband Tax, it is wasteful and negligent spending on a rural broadband scheme that is not working.”

For Curran, there has been no consultation with the industry and no chance to scrutinise the outcomes of the existing rural broadband scheme.

“Consumers will be taxed more to pay for a policy failure,” she adds. “Previously unpublished market research in rural New Zealand shows 68 per cent of businesses and households are angry and frustrated with their internet connections.

“That’s no surprise given that after five years the government funded rural broadband scheme has never been evaluated and no figures of households connected had ever been published.”

According to Communications Minister Amy Adams however, the passing of the Telecommunications (Development Levy) Amendment Levy Bill underscores the Government’s commitment to extending enhanced connectivity to regional New Zealand.

“The extension of the Telecommunications Development Levy (TDL) will fund the $100 million expansion of fast, reliable broadband to the regions,” Adams claims.

“It will also establish a $50 million fund to extend mobile coverage in black spot areas such as along main highways and in popular tourist destinations.”

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